Lyft, SideCar and Tickengo make mobile apps that connect drivers to passengers who exchange donations for rides. The donations are only suggested, but riders who don’t make them risk lower ratings from the drivers. The PUC told the companies they lacked the necessary charter party carrier permits to operate.

“Our view is we are not offering a transportation charter service, so there’s nothing to cease-and-desist,” said SideCar CEO Sunil Paul in an interview this morning.

“They seem to have an attitude where they lump Uber, SideCar and other smartphone companies in one, without looking at the specific details of how we operate,” he added. (Indeed, Uber received a similar letter two years ago, and also continues to operate.)

Lyft COO John Zimmer told a similar story. “It was clear that they didn’t have an understanding of what we do. We designed the service to be in full compliance with regulations. We’ve been in conversations with them, and they admitted to the fact that current regulations weren’t written with this in mind.”

Both Paul and Zimmer said they have been in ongoing discussions with the PUC since then they received the letters in August.

While the talks have continued, the PUC has not done anything to enforce the orders. “We understand that what’s likely to happen next is a public investigation,” Paul said.

The PUC’s general counsel, Frank Lindh, told the Chronicle that his concerns include liability in the case of an accident, and commercial competition for existing regulated taxi systems.

SideCar, Tickengo and Lyft clearly knew their legality was going to be questioned from the start.

Lyft cars have signature hot-pink mustaches.

“Everything we’ve done has gone above and beyond what any alternative transportation, what taxis or limos, requires. We’ve been very careful from the beginning,” said Zimmer.

“There’s certain entrenched interests that are not happy, and they have a lot of sway to try to put this existing innovation back in the bottle. But smartphones are not getting any dumber,” Paul said. “We’re out to build something that makes it possible for you to not have to own your own car, and this is the beginning of a series of innovations that will make that possible.”

Zimmer had a similar message. “The important thing is we need to be able to innovate. There are serious problems with transporation in this city. Why would these regulators try to stunt innovation during a tough economy?”

Paul noted that he is intimately familiar with California transportation law from his successful efforts to pass AB 1871, which made car-sharing services like Getaround and RelayRides legal.

He pointed to two specific SideCar features that were built with compliance in mind: Passengers cannot request a ride without specifying where they are headed; and the suggested donation is based on an automatically calculated peer-based average, not an amount set by SideCar. Plus, said Paul, over the lifetime of the SideCar service (just about the last six months), about 1 percent of passenger trips have been given for free.

Update: Tickengo co-founder Geoff Mathieux called and confirmed his company received a cease-and-desist in September. He contended that Tickengo had been unfairly lumped in with Lyft and SideCar, because those services have much in common with commercial taxi businesses.

Tickengo, by contrast, doesn’t screen or train drivers, doesn’t buy insurance, and actually limits the amount any driver can earn per year to $8,776 (the estimated American cost of car ownership).

“We’re trying to elimate the need for commercial vehicles, so we’re the total opposite,” Mathieux said. “Lyft is taking regular people, yes, but they’re turning them into professional drivers. It’s not disruptive; it’s a yellow cab with a mustache.”

“We’re not all created equal here,” he continued. “You can’t lump all these companies in one bucket. Some are legal and some are not. They’re BS-ing their way into peer-to-peer, and it’s not peer-to-peer. Frankly, I think the PUC has a point.”

Update 2: A representative for the PUC replied to questions we sent via email.

What are the core concerns about how these services operate, and what regulations do they violate?

Companies must obtain charter party carrier permits, which a company receives after the CPUC ensures that its drivers are properly licensed and is insured to carry commercial passengers.

What happens, going forward? It doesn’t appear that these services are stopping. What’s next?

The law provides various enforcement tools, fines, filing criminal complaints and possible imprisonment, vehicle(s) impoundment, coordinating with other law enforcement agencies, etc.

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